MetLife Officials Tell Fed to Keep Bailout Funds, Avoid Federal Intrusion
April 15, 2009 – Officials for the nation’s largest provider of life insurance, New York-based MetLife, this week refused to participate in the taxpayer-backed U.S. Department of the Treasury Capital Purchase Program, formerly known as the Troubled Asset Relief Program (TARP).
MetLife has been a federally chartered bank holding company since 2001 when the insurer created a subsidiary banking unit, MetLife Bank. But company officials decided against participating in the federal relief program.
“MetLife is well positioned, with approximately $5 billion in excess capital, a strong balance sheet and leading market positions in our core group and individual insurance businesses, where our revenues continue to be healthy,” said C. Robert Henrikson, chairman, president and chief executive officer of MetLife. “MetLife has already taken actions to reinforce its strong financial position, including raising capital in the marketplace. We have therefore decided not to participate in the Program.”
“Although a number of economic challenges remain, MetLife is well positioned to continue meeting the needs of our clients,” added Henrikson. “We repositioned our investment portfolio over a year ago for the current recession. completed a successful $2.3 billion common stock offering last October and successfully remarketed over $1 billion in debt earlier this year. We are confident that we have the financial strength to continue to succeed now and over the long-term.”
MetLife, lost more than $1 billion in net income for 2008, reporting $3.21 billion for the year compared to $4.32 billion a year earlier.
The insurer posted a fourth-quarter 2008 profit decline of 12 percent, the fall of which was cushioned by investment gains. MetLife officials used investments in derivatives to post consecutive quarterly investment gains during the second half of 2008 despite declining equity markets. As with many life insurance companies, MetLife’s profit margin has been hurt by the rising cost of guaranteed minimum returns on annuities and other retirement products.
The insurer’s fourth-quarter net income dropped to $985 million from $1.12 billion. But MetLife offset the income decline by earning $1.6 billion on derivatives, including interest-rate investments. MetLife officials reported a $1.35 billion investment gain for the quarter, which surpassed analysts’ expectations.
“MetLife’s results largely matched our expectations, which is good in today’s environment,” Nigel Dally, an analyst with Morgan Stanley, said in a research note. “The company stands out as providing safe-haven-like characteristics.”
MetLife officials sold $2.3 billion in new shares in October and stockpiled cash to prepare for a worsening U.S. economy and rising corporate-bond defaults. The insurer’s bolstered capital could enable the insurer to acquire assets of its struggling competitors, such as recently bailed-out American International Group (AIG). Chief Financial Officer William Wheeler said in September that MetLife is “very aggressively” seeking expansion outside of the U.S. AIG is looking to unload its overseas life insurance units.
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